Resolution evades California milk producers, processors

Despite a negotiated agreement, California's milk producers and processors are no closer to a resolution on th whey value in pricing for 4b milk.At CDFA's Sept. 12 hearing, processors questioned the validity of the deal and testifiedthat economic conditions don't warrant an increase in milk prices.

After last week’s hearing, California’s milk producers and cheese processors remain at odds over the whey value in the pricing formula for 4b milk used to manufacture cheese.

Producers petitioned the California Department of Food and Agriculture for relief after nearly 400 dairies, challenged by a crash in the export market and low milk prices, exited the business since 2008.

Assemblyman Richard Pan in July negotiated a compromise between producers and processors while pushing legislation aimed at price relief.

That negotiated deal would increase the price of 4b by 46 cents per hundredweight for one year after implementation and permanently raise the cap on the value of dry whey from 75 cents to $1.00 per hundredweight.

Processors, however, came out strong at CDFA’s hearing on Sept. 12, contending economic conditions don’t warrant an increase in the milk price.

The position of cheese processors, represented by the Dairy Institute of California, has not changed, said Rachel Kaldor, executive director of the Institute.

That position in the agreement supported a hearing and increases to the whey value “if economic conditions warrant.” Based on CDFA data, milk prices paid to farmers have increased this year and feed prices are decreasing. Institute representatives submitted testimony showing that at the hearing, she said.

In addition, language encouraging CDFA to hold a hearing in Pan’s legislation at the time of the agreement was later stripped from the bill. That language was an important part of the agreement and processors were left wondering about the validity of the deal, she said.

Processors’ position on the agreement is “bogus,” said Tom Barcellos, president of Western United Dairymen and a Porterville dairyman who also owns a diversified farming operation.

Processors led producers to believe they had a deal and now they are claiming there wasn’t a deal. Processors kept testifying there was no deal, and legislators testified at the hearing there was a deal, he said.

Processors’ contention was not really a surprise; they were backing away from the deal even before the ink was dry, he said.

“To me, it’s very disingenuous,” he said.

As for processors’ contention that conditions don’t warrant the price increases, producer groups testified about the collapse in the producer sector over the last several years, which continues today. They also testified to the effect on support industries, which have been harmed by lost business and bankruptcies.

Barcellos said he doesn’t know what CDFA Secretary Karen Ross will decide, but thinks at the very least she’ll grant the emergency price increase of 46 cents to the whey value.

“Is that a win? No, I would consider that a pacification,” he said.

The right decision would be to put full value on whey and then let the industry task force work on the issue from there, he said.